Friday, February 01, 2013

Online publication protected by first sale? or just fair use?

Stevo sued SBR, mostly for copyright and trademark
infringement. The court initially dismissed the complaint for lack of
extraterritorial jurisdiction, but reversed itself on a Rule 59(e) motion and
dismissed the complaint on other grounds.Stevo sells pay per view and subscriptions to access “electronically-distributed
sports betting reports, including compiled sports handicapping information.”SBR, a foreign corporation with its principal
place of business in Costa Rica, operates sbrforum.com, which publishes sports
betting and handicapping information. Its message board allows users to post
messages related to sports betting and handicapping.Defendant Daniele, a Virginia resident, uses
SBR.SBR encourages visits through “loyalty
points,” which are awarded for logging on and for contributing content to the
message board.Extra points are
available for well-thought-out “original” content.Users can also give each other loyalty
points.Loyalty points may be redeemed
for credits at offshore gambling websites, and they’re even redeemable for cash
as long as they’re gambled with first.

Stevo’s complaint alleged 65 causes of action, including
trademark infringement, copyright infringement, and Florida and Nevada state
law claims based on the unlicensed publication of Stevo’s works.For example, Daniele allegedly purchased
sports analysis from Stevo and then posted it on the message board.

The court initally dismissed the complaint for want of subject
matter jurisdiction because the copyright and trademark laws lack
extraterritorial force.It revised its
opinion because Stevo identified a US user who uploaded reports.On reconsideration, the court determined that
it had the power to hear the case, but that the claims weren’t properly
pleaded.

On copyright, plaintiffs’ inconsistent copyright ownership
allegations failed to state a claim: it alternately alleged that it owned the
copyrights and that its websites did, and a parent may not assert the
intellectual property rights of its subsidiary in a copyright infringement
action. Had ownership been properly pleaded, the court observed, the claims
would likely be within the reach of the Copyright Act, as the Lanham Act claims
were.

Turning to the Lanham Act claims, the court found that it had
subject matter jurisdiction because Stevo successfully pleaded that the actual
or intended recipients of the alleged infringing acts were in the US.“SBR’s U.S.-centriccontent--English-language analysis of
American professional and collegiate sports--supports thenotion that the SBR website’s ‘intended
audience’ was United States consumers.”Plus, the complaint alleged that at least one member of the actual
audience came from Virginia.

However, the court found that the first sale doctrine
protected the uses here.(Oh, dear.While this is Stevo’s fault for trying to
turn its copyright claim into a trademark claim, the first sale doctrine doesn’t
actually protect against copying.Fortunately, the court gets it right immediately thereafter.)Under first sale, a reseller who doesn’t
materially change goods isn’t an infringer.The court found that the same went for service marks, “at least where
the service can be sold and resold without change to its ‘nature, quality, and
genuineness,’” citing Tumblebus
Inc. v. Cranmer,399 F.3d 754 (6th
Cir. 2005).(This case doesn’t seem to
stand for that proposition as I read it, though a ticket reseller should
succeed under first sale, and we should also perhaps conceive of the
information here as a “good” rather than a service given how it’s being used—the
court is certainly correct that the thing of value, the information, isn’t
being changed; indeed, that is the gravamen of Stevo’s complaint, and the court
identifies the doctrine as applying to the “handicapping reports,” not the
service of providing reports.While
first sale isn’t right here, this does raise the point that one should not be
able to evade the first sale doctrine by claiming infringement of a service
mark for the service of selling the branded goods.)

Anyway, Stevo’s alleged marks were the proper names of its
sports analysts.SBR users allegedly
bought “trademarked” sports analysis from Stevo and then resold it or gave it
away on SBR’s message board, usually repeating the analysis verbatim.These acts weren’t infringements.

Stevo argued that SBR’s publication created initial interest
confusion as to the legitimate source of the handicapping reports; they argued
that an exception to first sale applied to use of a trademark that causes the
public to believe that the reseller is an authorized seller or franchisee. This
was based on Stevo’s loss in the organic Googlefight: “a search for Stevo’s marks
plus the word ‘picks’ (i.e., ‘SteveBudin picks’) returns results in which SBR’s website is ranked higher
than any of Stevo’s.”That wasn’t enough
to trigger an exception to first sale.Among other things, the complaint identified comments critical of Stevo’s
analysts on the SBR message board, making confusion as to authorization or
sponsorship “incredible.”Nor could the
complaint be read to allege that SBR used Stevo’s marks in its ads or that it
held itself out has having special access to Stevo.

Stevo did allege that SBR advertised that visitors could
obtain PPV sports analysis for free, but it didn’t offer any factual support,
and also that wouldn’t create the type of confusion required to defeat first
sale.“Consumers would need to believe
that a Stevo-authorized retailer provided for free what Stevo itself charged
for. In context, therefore, it is implausible that such advertisements create
the impression that SBR is an authorized retailer of Stevo’s services.”Also, there was no allegation of search
engine manipulation by keyword buys or metadata, “conduct at the heart of
initial interest confusion on the internet.”(Paging Eric Goldman!)

Okay, take all this discussion about first sale and apply it
to nominative fair use.In the 9th
Circuit, nominative fair use isn’t an affirmative defense but rather identifies
uses that aren’t likely to confuse.If a
complaint fails to allege anything but nominative fair use, it fails to state a
claim.So here.Users needed to use the marks to identify
Stevo’s services and they used the marks only to do so. In addition, the
message board criticism of Stevo’s analysists greatly reduced the likelihood of
sponsorship/endorsement confusion.Plus,
the usernames under which the reports were posted (“Pin Fish,”
“PepperMillRick,” “goldengreek,” etc.) didn’t suggest to visitors that either
the posting user or SBR itself was the ultimate source of the report.Initial interest confusion won’t defeat
nominative fair use without “more indicia of endorsement” than alleged here, as
in Abdul-Jabar v. General Motors Corp., where “the ‘commercial custom’ of
celebrity endorsements in television commercials created an issue of fact as to
whether the defendant’s commercial implied the celebrity plaintiff’s
endorsement of its product,” or Downing v. Abercrombie & Fitch, where there
was “an issue of fact with respect to endorsement when the mark was used to
describe the defendant’s product rather than the plaintiff’s.”Here there was neither a similar custom of
sports analysts endorsing message boards nor use of Stevo’s marks to describe
SBR’s own products or services.

Dilution and contributory infringement were therefore also
out of the picture: nominative fair use does not dilute.(Seriously?Over 1000 paragraphs in the complaint and Stevo pled federal dilution, the kind that requires
fame among the general consuming public of the US?*cough*Rule 11*cough*.)And without predicate acts of trademark
infringement by SBR users, no contributory infringement either.

The court then turned to state-law claims against SBR and
found them CDA § 230-barred. Under Roommates,
SBR’s message board didn’t make SBR a developer of the content.Indeed, §230 was specifically designed to
overrule a court case holding a website responsible for a message posted on one
of its message boards.“‘[P]assive’
message boards with only occasional curation by messageboard moderators warrant immunity under
section 230.”SBR’s practice of awarding
loyalty points for posts didn’t make it a developer under the CDA.Its encouragement wasn’t specifically
directed at eliciting illegality.Plus,
SBR users could give loyalty points to each other; without reviewing every
award, SBR couldn’t distinguish unlawful encouragement from perfectly
legitimate encouragement, but § 230 was intended to relieve websites of that
burden.SBR’s policy of favoring
original content also distinguished it from a developer.Its allegedly “sporadic” attempts to
eliminate infringing content “are precisely the type of thing that the CDA
promotes,” by precluding liability based on imperfect monitoring.

The court then asked whether Stevo’s claims attempted to
impose liability based on SBR’s status as a “publisher or speaker,” mindful of
attempts to plead around that element.The name of the cause of action isn’t important, but rather whether it inherently
requires the court to treat the defendant as the “publisher or speaker” of content provided by another.Misappropriation of trade secrets did so:
disclosure of trade secrets was publishing or speaking.Unlawful acquisition of trade secrets would be
a closer question in other circumstances, but the complaint didn’t allege any
facts allowing the court to infer that the trade secrets were acquired in any
other way than through users’ message board posts, making publication again
critical.

Assuming, without deciding, that “misappropriation of
licensable commercial property” was a cause of action in Florida, it was also
CDA-barred.Florida has a commercial
misappropriation statute preventing the unauthorized use of “the name,
portrait, photography, or other likeness of any natural person without consent,”
but that would require Stevo to allege that it was authorized in writing to use
those names, which it hadn’t done.(And
if it did, that would still be CDA-barred in the 9th Circuit, since
it’s a state IP law.)General INS v. AP
misappropriation, assuming Florida recognizes the tort, was CDA-barred because
the alleged competitive injury—that SBR gave away for free what Stevo sold—was impossible
without characterizing SBR as a speaker or publisher.

Stevo then tried “contributory misappropriation of licensable
commercial property.”Arguably, this
doesn’t require that SBR speak or publish, only that it induce others to do
so.But that theory would swallow CDA
immunity.SBR generally encouraged users
to post, but it didn’t tell them what information they should or must include
and didn’t encourage or enhance any infringing content.That wasn’t enough. Stevo’s Florida civil
theft claim also failed, since the only plausible mechanism by which SBR
obtained or used Stevo’s property was through publication.

Tortious interference claims failed too: Stevo didn’t allege
that SBR knew about specific contracts its users had with Stevo in a manner
that was more than speculative. Plus, the only interference came again from
publication.

Finally, the court found that it lacked personal jurisdiction
over Daniele.Stevo alleged that SBR
paid Daniele to publish infringing material on SBR’smessage board, that Daniele’s publications
relate to the “sports wagering” industry in Nevada, and that Daniele’s online
statements were accessible in Nevada. These were insufficient contacts to give rise
to personal jurisdiction.Even if
Daniele was SBR’s paid agent, a principal’s contacts may not be imputed to the
agent for purposes of personal jurisdiction.Moreover, merely discussing sports betting on an online message board
doesn’t provide the people talking with a reasonable anticipation of being
haled into Nevada courts, even if such bets are only legal in Nevada.Advertising alone is insufficient to support
jurisdiction in these circumstances; simple publication couldn’t be
either.Of course, internet availability
doesn’t establish purposeful direction either, especially where the alleged
victims of the postings weren’t forum residents.(I am curious why they filed in Nevada,
especially given the governing 9th Circuit law.)

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